When do I need to pay contractors superannuation?

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Your contractors may be owed superannuation

There is a general misconception that hiring a contractor who provides an ABN means there is no need to withhold taxes or pay superannuation. This is true for many cases however many employers do not realize that the scope of the superannuation guarantee includes contractors who meet certain criterion.

When do you have to pay contractors superannuation?

If you hire a contractor who provides an ABN you will likely still be liable to pay the minimum superannuation guarantee of 9.5% if that contractor is paid under any of the following circumstances:

1) The contractor is paid predominantly for their labor i.e. over 50% of payments to the contractor are for their personal labor.

2)  The contractor is paid for their labor hours performed rather than to achieve a specific result.

3) The contractor may not delegate the work to another person or party.

4) You pay the contractor over $450 in a calendar month.

You can view more information on this at the ATO website.

When do you not have to pay contractors superannuation?

You may not have to pay your contractors the superannuation guarantee in the following circumstances:

1) They are paid through their entity which is a PTY LTD company or a trust and the work agreement is also with that entity and not the individual worker.

2) You are paying them for a specific result rather than their hours performed.

3) They are able to delegate the work they are contracted for and are not restricted to personally completing it themselves.

4) The contractor receives less than $450 in a calendar month - Super will only be paid for the months where payments exceed this threshold.

You can use the Super Guarantee eligibility tool Here to find out if your contractor is an employee for Superannuation purposes. The calculator takes you through a series of detailed questions which will determine if the specifics of your contractor arrangement fall under the scope of the superannuation guarantee.

For help with setting up payroll, contractor payments and superannuation payments you can contact CTK ACCOUNTING PTY LTD at ctkaccounting.com to get professional help from local Wollongong bookkeepers.

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